Cover

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Title Page, Copyright

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pp. i-vi

CONTENTS

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pp. vii-viii

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ACKNOWLEDGMENTS

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pp. ix-xiii

Blame the Midwest. Tender academic minds often need peace and quiet to get down to business. We first met in the delightful town of La Crosse, Wisconsin (also known as “Mud City, USA”), where distractions were few and far...

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PROLOGUE

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pp. 1-8

Can government borrowing be made safe? As we are finishing this book, the world is grappling with the aftermath of the financial crisis of 2008. What began as a problem in the securitized market for US mortgages became a...

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1: Lending to the Sound of Cannon

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pp. 9-44

Gio Girolamo Di Negro was not a happy man as he pored over his account books in Genoa during winter 1596.1 His company, dedicated to commercial ventures and credit operations, was making a profit—but only a small one. All...

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2: Philip’s Empire

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pp. 45-73

It was a cold autumn night in October 1469. Two Castilian gentlemen sat down at an inn near the Aragonese border and ordered a hot meal after a long day of travel. Their servant, a shabbily dressed young man in his late...

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3: Taxes, Debts, and Institutions

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pp. 74-104

Early modern kings evoke images of absolute rule, crystallized in the famous statement attributed to Louis XIV: “L’État, c’est moi.” Modern economic research often refers to this image when characterizing European states...

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4: The Sustainable Debts of Philip II

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pp. 105-131

For a long time, Philip II’s defaults have been blamed on a disastrous combination of the Crown’s unsustainable fiscal situation, on the one hand, and myopic lenders, on the other. Braudel famously argued that each bankruptcy...

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5: Lending to the Borrower from Hell

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pp. 132-172

On Thursday, October 12, 1307, the Grand Master of the Order of Templars, Jacques de Molay, was carrying a heavy burden: he was a pallbearer at the funeral of Catherine of Courtenay, sister-in-law to Philip IV of France. The...

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6: Serial Defaults, Serial Profits

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pp. 173-210

The king continued to borrow massively throughout his reign, using the help of bankers to raise short-term financing. The Genoese banking network kept incentives aligned; the king’s best strategy was to service his debts, so that he...

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7: Risk Sharing with the Monarch

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pp. 211-242

In early October 1591, lookouts near Cadiz could see the sails of the Spanish treasure fleet on the horizon. After crossing the Atlantic from Havana, the galleons’ final leg of their journey saw them sailing up the Guadalquivir...

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8: Tax, Empire, and the Logic of Spanish Decline

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pp. 243-270

Non sufficit orbis—the world is not enough. When Sir Francis Drake’s men stormed the Spanish governor’s palace in Santo Domingo in 1586, they found a coat of arms displaying a map of the world. It was adorned with a horse...

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EPILOGUE: Financial Folly and Spain’s Black Legend

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pp. 271-280

Financial folly. The very words conjure up images of overpaid bankers, venal politicians and ruined savers, economic chaos and disastrous collapses in market confidence. Financial folly is a common explanation for booms and...

REFERENCES

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pp. 281-296

INDEX

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pp. 297-312